U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from _______________to ________________
Commission File Number: 01-16874
National Real Estate Limited Partnership Income Properties II
(Exact name of small business issuer as specified in its charter)
Wisconsin 39-1553195
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
1155 Quail Court, Pewaukee, Wisconsin 53702-3703
(Address of principal executive offices)
(414) 695-1400
(Issuer's telephone number, including area code)
- - - - - - - - - - - - - - - - - - N/A- - - - - - - - - - - - - - - - - - - -
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . .2
Balance Sheet (unaudited) - June 30, 1999
and December 31, 1998 . . . . . . . . . . . . . . . . . .2
Statement of Operations (unaudited) - Three and Six months
ended June 30, 1999, and 1998 . . . . . . . . . . . . . .3
Statement of Cash Flows (unaudited) -
Six months ended June 30,1999, and 1998 . . . . . . . . .4
Statement of Changes in Partners' Equity (unaudited) -
Six months ended June 30, 1999, and 1998. . . . . . . . .5
Notes to Financial Statements (unaudited). . . . . . . . . .6-7
Item 2. Management's Discussion and Analysis or Plan of Operation8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . 10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . 10
Item 5. Other information . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
BALANCE SHEET
(Unaudited)
June 30, 1999 December 31,
1998
ASSETS
CURRENT ASSETS
Cash and Cash Equivalent $577,560 $573,699
Other Assets 277 7,929
OTHER ASSETS
Investment properties, at cost
Land 516,590 516,590
Buildings and improvements 4,154,507 4,154,507
__________ _________
4,671,097 4,671,097
Less accumulated depreciation 1,603,400 1,536,009
__________ _________
$3,067,697 $3,135,088
__________ __________
INTANGIBLE ASSETS:
========== =========
Debt issue costs, net of accumulated 25,218 26,855
amortization of $4,902 as of June 30,
1998 and $2,441 as of December 31, 1997
_______ _________
========= =========
$3,670,752 $3,743,571
========== =========
=========== ========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued expenses and other liabilities $44,381 $28,579
Tenant security deposits 25,555 26,960
Mortgage notes payable 535,737 539,334
Rent received in advance 16,657 19,666
_________ ________
622,330 614,539
PARTNERS' CAPITAL (DEFICIENCY):
General Partners $44,935 $43,802
Limited Partners 3,003,487 3,085,230
(authorized
__________ _________
3,048,422 3,129,032
__________ __________
SEE NOTES TO FINANCIAL STATEMENTS. $3,670,752 $3,743,571
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
1999 1998 1999 1998
OPERATING INCOME:
$179,110 $195,625 $362,179 $386,557
OPERATING EXPENSES
Operating 113,072 87,444 193,393 168,451
Administration 35,817 35,377 69,703 64,147
Depreciation and amortization 34,515 34,415 69,029 68,864
Interest 11,768 11,691 22,973 23,012
_________________________________________
195,172 168,927 355,098 324,474
_________________________________________
INCOME (LOSS) FROM OPERATIONS (16,062) 26,698 7,081 62,083
_________________________________________
OTHER INCOME (EXPENSES):
Interest income and other income 9,133 7,117 15,578 36,613
________________________________________
NET INCOME (LOSS) ($6,929) $33,815 $22,659 $98,696
=========================================
Net Income (Loss) ($346) $1,691 $1,133 $4,935
attributable to
General Partners (5%)
Net Income (Loss) ($6,583) $32,124 $21,526 $93,761
attributable to
Limited Partners (95%)
Per Limited Partnership $0.32 $1.56 $1.04 $4.54
Interest outstanding
SEE NOTES TO FINANCIAL STATEMENTS.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A Wisconsin Limited Partnership)
Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1999 1998
OPERATING ACTIVITIES
Net income (loss) for the period $22,659 $98,696
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation 67,392 67,212
Amortization 1,637 1,652
of debt issue costs
Changes in operating assets and liabilities:
Other assets 7,651 (368)
Rents received in advance (3,010) 2,836
Accrued expenses and other liabilities 15,802 17,109
Tenant security deposits (1,405) 2,037
NET CASH PROVIDED BY OPERATING ACTIVITIES 110,726 189,174
INVESTMENT ACTIVITY:
Additions to investment property 0 0
FINANCING ACTIVITIES:
Distributions to partners (103,268) (98,105)
Payments on mortgage payable (3,597) (3,339)
____________________________
NET CASH PROVIDED BY FINANCING ACTIVITIES (106,866) (101,444)
____________________________
INCREASE (DECREASE) IN CASH 3,861 87,730
CASH AND CASH EQUIVALENTS AT BEGINNING 573,699 490,973
OF PERIOD
____________________________
CASH AT END OF PERIOD $577,560 $578,703
============================
SEE NOTES TO FINANCIAL STATEMENTS.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
(UNAUDITED)
JUNE 30, 1999
Limited General
Partners Partners Total
Six Months Ended June 30, 1999
Partners' Equity, beginning of qtr $3,085,230 $43,802 $3,129,032
Distributions (103,268) - - (103,268)
Net Income (Loss) 21,525 1,133 22,658
---------- -------- ----------
Partners' Equity, end of quarter $ 3,003,487 $44,935 $3,048,422
========== ======== ==========
Six Months Ended June 30, 1998
Partners' Equity, beginning of qtr. $3,089,574 $38,867 $3,128,441
Distributions (98,105) - - (98,105)
Net Income (Loss) 93,761 4,935 98,696
--------- ------- ----------
Partners' Equity, end of quarter $3,085,230 $43,802 $3,129,032
========== ======== ==========
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
1. In the opinion of the General Partners, the accompanying unaudited
financial statements contain all adjustments (consisting of normal recurring
accruals) which are necessary for a fair presentation. The statements, which
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements, should be
read in conjunction with the National Real Estate Limited Partnership Income
Properties-II annual report for the year ended December 31, 1998. Refer to
the footnotes of those statements for additional details of the Partnership's
financial condition. The operating results for the period ended June 30, 1999
may not be indicative of the operating results for the entire year.
2. National Real Estate Limited Partnership Income Properties-II (the
"Partnership") was organized under the Wisconsin Uniform Limited Partnership
Act pursuant to a Certificate of Limited Partnership dated June 5, 1986, to
acquire primarily existing commercial and residential real properties and
hotels. John Vishnevsky and National Development and Investment, Inc.,
contributed the sum of $1,000 to the Partnership as General Partners.
The Limited Partnership Agreement authorizes the issuance of 40,000 Limited
Partnership Interests (the "Interests") at $250 per Interest with the
offering period running from August 18, 1986 through August 18, 1988.
On August 18, 1988, the Partnership concluded its offering and capital
contributions totaled $5,163,031 for 20,653.69 Limited Partnership Interests.
Pursuant to the Escrow Agreement with the First Wisconsin Trust Company,
Milwaukee, Wisconsin, until the minimum number of Interests (4,850) and
investors (100) were subscribed, payments were impounded in a special
interest-bearing escrow account. On February 2, 1987, the Partnership
received the required minimum capital contributions and $1,332,470,
representing 5,329.88 Interests,was released to the Partnership.
3. National Realty Management, Inc. (NRMI 1999.
4. The mortgage note payable is secured by the Amberwood Apartments. The
loan bears interest at a variable rate of interest (based on five year
treasury securities) plus 2.25% adjusting to 2.35% on May 1, 2002. Monthly
payments of principal and interest are due based on a twenty five year
amortization schedule, which also adjusts on May 1, 2002. All unpaid
principal and interest is due on April 1, 2007. Maturities from 1999 to
2002 are: $7,009, $7,497, $8,294, $9,029, and $9,828 respectively.Maturities
from 2004 and thereafter are $498,121.
5. In 1992, the Partnership purchased 12 units of Amberwood Condominiums
from National Real Estate Limited Partnershipship is contingently liable
to pay NRELPVI proceeds from a future sale of Amberwood Condominiums as
set forth in a Future Interest Proceeds Agreement. Upon the future sale of
Amberwood Condominiums, NRELPVI is entitled to receive 50% of the net sales
price above $57,500 per unit (reduced by normal selling costs) until the
Partnership earns a cumulative return of 20% on its investment. After that,
NRELPVI will receive 60% of the net sales price above $57,500 per unit.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES-II
(A WISCONSIN LIMITED PARTNERSHIP)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
The Partnership owns and operates two investment properties: a portion of Cave
Creek Lock-It Lockers,containing 37,792 of 46,028 net rentable square feet,
located in Phoenix,Arizona, and the Amberwood Apartments, a 56-unit
apartment complex in Holland, Michigan.
National Real Estate Limited Partnership Income Properties ("NRELP-IP") owns
the remaining portion of Cave Creek Lock-It Lockers. NRELP-IP is a
Wisconsin limited partnership, affiliated with the General Partners.
Amberwood's average occupancy rate for the six months ended June 30, 1999,
was 96%. Cave Creek Lock-It Lockers' occupancy during the same period was
89.49% based on net rentable square footage. During the comparable period
in 1998 occupancy rates were 96.52% for Amberwood and 93.86% for Cave Creek
Lock-It Lockers. The Competition Study and information gathered from the
Arizona Mini-Storage Association show occupancy rates of 91% to 92% occupied
for the Cave Creek Lock-It Lockers area. The market continues to soften in
the Phoenix area due to the over-building of self storage facilities within
5-mile radius of the property.
Cave Creek rental rates currently range from $10.00 to $165.00 for the second
quarter of 1999. Rental rates for Amberwood's three bedroom apartments
are $750, and $640-$699 for two bedrooms.
INCOME STATEMENT
Six Months Ended June 30, 1999 and 1998
Net income decreased $76,037 from $98,696 for six months ended June 1998, to
$22,659 for six months ended June 1999.
The decrease in net income is due to a decrease of operating income of
$24,378, increased operating expenses of $30,624, and a decrease in
interest and other income of $21,035.
The decrease in operating income of $30,624 is due, in part, to increased
vacancies of $8,700 at Cave Creek Lock-It Lockers during the first half of
1999 as compared to the first half of 1998. During these periods, occupancy
decreased from 93.86% to 89.49%. Amberwood vacancies increased $4,600,
and revenue from furnished apartments decreased $11,300 due to the fact
that more residents are buying homes.
Operating expenses increased $24,942 primarily due to $22,760 for exterior
painting and an increase of $3,500 in carpet purchases due to upgrades
necessary to rent vacant apartments.
The significant decrease in other income was primarily attributable to a
positive settlement of $23,500 in 1998 in favor of the partnership.
Three Months Ended June 30, 1999 and 1998 Net Income decreased $40,744
from $33,815 for three months ended June 1998 to a loss of ($6,929) for
three months ended June 1999.
Operating income decreased $16,515 from $195,625 to $179,110. The decrease in
operating income of $16,515 is due to an increase in vacancy losses of $5,061
at the Cave Creek Lock-it Lockers and $5,364 in vacancy losses at Amberwood.
Furnished apartment income also decreased $5,968 at Amberwood.
Operating expenses increased $25,628 from $87,444 for the quarter ended June
30, 1998, to $113,072 for the quarter ended June 30, 1999. Operating
expenses increased primarily due to $22,760 expended for exterior painting
in 1999.
CASH FLOW
Six Months Ended June 30, 1999 and 1998
Cash increased $3,861 for the six months ended June 30, 1999, as compared to
an increase of $87,730 for the six months ended June 30, 1998. The
difference is due to a higher net income and lower distributions to
investors for the six months ended June 30, 1998, as compared to the same
period in 1999.
The cash balance on June 30, 1999, was $577,560, which is a ratio of 6.7:1 to
current liabilities. As noted by this ratio, the partnership has a strong
liquidity position.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 25, 1999, a limited partner who owns interests in four
partnerships, the general partners of which are John Vishnevsky, National
Development and Investment, Inc., and E.C. Corp. (The same general partners
as in this partnership), filed a complaint in the Waukesha County Circuit
Court of the State of Wisconsin on behalf of a putative class of all of the
limited partners in the defendant partnerships. The complaint was filed
against Mr. Vishnevsky, National Development and Investment, Inc., many
partnerships for which those general partners serve as general partners, and
various individuals and entities who are alleged to exercise control over
the partnerships and/or perform services for the partnerships. The
complaint asserts putative class claims and derivative claims under the
Wisconsin Uniform Limited Partnership Act alleging, among other things,
that the general partners wasted partnership assets and breached their
fiduciary duties to the partnerships and their limited partners by charging
excessive fees and expenses in managing the affairs of the partnerships.
In addition to money damages, the plaintiff is seeking to wind up the affairs
of the partnerships and an accounting of the partnerships to be supervised
by a receiver to be appointed by the court. The case has not been certified
to proceed as a class action. Defendants have filed motions to dismiss
plaintiff's claims; those matters have not been decided. This partnership,
National Real Estate Limited Partnership Income Properties II, was not
named in the complaint. The general partners representing the limited
partnerships named in the complaint believe the allegations are without
merit and are vigorously defending the lawsuit.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K for the quarter ended June 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Real Estate Limited Partnership
Income Properties-II
(Registrant)
Date /August 11, 1999 /S/ John Vishnevsky
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date /S/August 11, 1999 /S/ John Vishnevsky
John Vishnevsky
Chief Financial and Accounting Officer
Date /S/August 11, 1999 Stephen P. Kotecki
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Real Estate Limited Partnership
Income Properties II
(Registrant)
Date August 11, 1999 ________________________
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date August 11, 1999 ____________________________
John Vishnevsky
Chief Financial and Accounting Officer
Date August 11, 1999 _____________________________
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
J:\WPDOCS\REPORTS\10Q-NIP2-2nd qtr.dos
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<RECEIVABLES> 0
<ALLOWANCES> 0
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<CURRENT-ASSETS> 4,671,067
<PP&E> 1,603,400
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<CURRENT-LIABILITIES> 86,593
<BONDS> 535,737
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 3,670,752
<SALES> 0
<TOTAL-REVENUES> 362,179
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 332,125
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,973
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<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
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<EPS-DILUTED> [BLANK]
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<F1>Refers to general partners & limited partners capital,
<F2>95% Limited Partners interest outstanding =$20,653.69
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